Macro-economics and firm-specific factors impacting the non-performing loans of vietnamese commercial banks in the context of COVID-19

The COVID-19 pandemic has created unprecedented economic disruptions worldwide, with the banking sector being one of the most affected industries. This paper aims to explore the impact of various factors on the nonperforming loans (NPLs) of Vietnamese commercial banks during the COVID-19 pandemic by employing a Bayesian hierarchical regression approach. The analysis highlights that the pandemic has led to a significant and positive increase in the NPLs ratio of Vietnamese banks, indicating that the financial health of these institutions has been adversely affected by the crisis. Moreover, the study uncovers that the impact of COVID-19 on NPLs is not uniform across all banks. Specifically, state-owned banks have experienced a more pronounced increase in NPLs compared to their private counterparts. This disparity suggests that state-owned banks may be more vulnerable to economic shocks due to their broader exposure to sectors and enterprises heavily impacted by the pandemic. The findings of this research offer critical insights into the dynamics of the banking sector in Vietnam during a global health crisis and emphasize the need for targeted policy interventions. The results also underscore the importance of understanding the differential impacts of such crises on various types of financial institutions. By identifying the factors that contribute to the increase in NPLs, this study provides valuable information that can inform future strategies aimed at enhancing the resilience of the banking sector against similar economic disruptions. Furthermore, the findings highlight the effectiveness of the policies implemented during the pandemic to support the banking sector, suggesting areas for improvement and further research.